What is Dividend Yield? How To Calculate Dividend Yield?

How does dividend yield work? Want to know how much cash flow you're getting for every peso you've invested in a company? The Dividend Yield can give you an idea of how a company's dividend payments related to its stock price.

What is Dividend Yield?
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A dividend yield is a financial ratio that indicates how much shareholders are paid in the form of dividends every year.

What are the importance of dividend yields?
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Companies with a higher dividend yield could be a good investment opportunity because:

• Dividend Yield is a sign of a stable company, as mostly profitable companies pay out dividends.
• They provide steady cash flows.
• Price of high dividend yield tend to fluctuate less with market fluctuations.
• Aids investor in decision making.
• Compares dividend with the market price of the stock.

How to calculate dividend yield?

​Just take the dividend amount multiply by 90% (less 10%  for tax) , divide it by the stock's price, and then multiply by 100 to convert to a percentage.

Net Dividend Yield = Dividends x 90% / Stock Price x 100
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An example, HOLCIM PHILIPPINES, INC. (HLCM) declare a cash dividend Php 0.98 per share, and then the closing stock price per share is Php 14.78. Using the stated formula, Holcim dividend yield as:

5.96% = 0.98 x 90% / 14.78 x 100 

I hope you have now understood the concept of dividend yield.​